Key points of investment:
The company released its 2024 quarterly report. Revenue was in line with expectations, and profit performance exceeded expectations! 2024Q1 achieved revenue of 2,243 billion yuan, an increase of 0.03% year on year; realized net profit due to mother of 157 million yuan, an increase of 32.4% year on year; after deducting non-net profit of 157 million yuan, an increase of 35.6% year on year.
The main packaging industry has a steady foundation, actively developing new products, new customers and new fields to achieve steady growth; aluminum-plastic film sales and unit prices are being dragged down by increased competition, and we look forward to subsequent optimization of the competitive pattern.
1) Beverage packaging business (including PET bottles and preforms, crown caps and labels, plastic anti-theft caps, OEM beverages):
2024Q1 achieved revenue of 1,066 billion yuan, an increase of 5.0% year over year. In 2023, the beverage packaging industry cluster consolidated strategic major customer markets, and closely followed the pace of a new round of investment from COFCO, Taikoo Cola, Dongpeng Drinks, etc., adjusted the production capacity structure, laid out emerging markets, and expanded market share in North China, Northwest China, Southwest China and South China. The company continues to strengthen the development of emerging brand customers and the three new project markets, and has achieved significant growth in the non-beverage PET bottle and bottle preforms market for condiments, dairy products, and daily chemicals. The beverage OEM division achieved growth in strategic customers such as Unification, Danone, and Cola, and the development of small and medium-sized customers for tea and plant-based beverages was also very effective. Ziri Packaging maintains continuous sales growth for strategic customers such as Liangle, Danone, Yibao, and Dongpeng Drinks, and continues to develop small and medium-sized customers.
2) Soft packaging new material business (spray aluminum paper and cardboard, PA/PE film, color paper packaging printing, excluding aluminum-plastic film):
2024Q1 achieved revenue of 713 million yuan, up 16.5% year over year. Paper packaging and plastic color printing actively explore bases outside Shanghai, increase customer coverage and strengthen cost advantages; actively develop new customers and achieve rapid growth based on existing strategic customers.
3) Aluminum-plastic film: 2024Q1 achieved revenue of 122 million yuan, a year-on-year decline of 38%. The aluminum-plastic film business was affected by cost reductions in the lithium battery industry chain. The unit price decline was quite obvious. The company actively controlled the sales share of customers with low gross margins. Thanks to the company's high capacity utilization rate, leading production process, and localization of raw materials and equipment, the company's profitability is still ahead of its peers, and its competitiveness is outstanding. Following the optimization of the competitive landscape of the industry, the profitability of aluminum-plastic film is expected to pick up.
Furthermore, aluminum-plastic film is thought to be more suitable for the solid-state battery path. Subsequently, with the gradual industrialization of solid-state batteries, Zijiang New Materials has obvious card position advantages.
Real estate and trade business losses are expected to gradually narrow, and Angge Avionics is about to enter a harvest period. 1) Real estate: According to the company's announcement, the subscription process for 68 villas in the North District of Zidu Shanghai Jingyuan Phase III began in October 2023. By the end of 2023, more than 50 villas had been pre-sold and pre-paid. The company's contract debt at the end of 2024Q1 was 1,764 billion yuan, an increase of 1,606 billion yuan over the previous year, mainly due to advance receipt of housing payments. In 2023, the real estate subsidiary Zidu Sheshan Real Estate lost 54.93 million yuan. Subsequently, as advance housing payments are gradually converted into revenue, real estate business profits are expected to improve significantly. 2) Commerce: The company continued to shrink the scale of its commercial and trade business, from a peak of 1,790 million yuan in 2019 to 691 million yuan in 2023. The commercial and trade business lost 89.48 million yuan in 2023, a decrease of 50.21 million yuan compared to 2022. 2024Q1 trade business revenue continued to decline by 23.1% year on year, and scale contraction is expected to help improve profitability. 3) Angji Avionics:
According to the company's announcement, in 2010, the company participated in China Aviation Civil Avionics Co., Ltd. and invested 675 million yuan to hold 15% of the shares. Angji Avionics, a joint venture between the company and General Electric of the United States, was selected as an avionics system supplier for the C919 large passenger aircraft, and the company indirectly held 7.5% of Angji Avionics. Angji Avionics provides 3 avionics work packages for the Chinese civil C919 large airliner: avionics core processing system, integrated display system, on-board maintenance, and flight recording system. At present, the C919 has entered the delivery stage, and Angji Avionics is expected to contribute revenue to the company.
The main packaging industry has created a new growth curve and returned to an upward channel by expanding products, expanding customers, and expanding fields; sales in the aluminum-plastic film business grew steadily, and profitability is expected to recover after subsequent competition eases; the real estate and trade business had large losses in the early stages, and the scale of the commercial and trade business is expected to improve in the future as sales of Jingyuan Phase III North District commence and the scale of the commercial and trade business shrinks. In 2020-2023, the company paid 0.25 yuan per share for four consecutive years. The corresponding dividend rate reached 4.1% based on the closing price on April 30, 2024, which highlighted the high dividend advantage. Maintaining the 2024-2026 net profit forecast of 7.12/8.15/888 million yuan, 2024-2026 net profit increased 27.3%/14.4%/9% year-on-year respectively. The PE corresponding to the current market value is 13/11/10X, maintaining the “buy” rating.
Risk warning: The price of raw materials has risen, and competition for aluminum-plastic film has intensified.